Share on twitter
Share on linkedin

The USDA in October WASDE reduced Argentine old crop production by 700 tmt from Sep while reducing exports and crush, as Argentina loses competitiveness versus the US. Brazil crushers have also started  to feel the shortage of beans, despite previously loading significant meal.

Despite the changes from September, the USDA estimates major origin crush to rise in 20/21 YoY, primarily led by South America. With the Phase 1 deal, the previously strong expansion in US crush led by a cutback in bean exports as a result of the trade war is expected to plateau in 20/21. South American crush will instead expand as bean exports revert to favor the US. US soymeal sales for 20/21 at 3.5 mmt are flat YoY.

August saw US soybean crush fall YoY for the first time since November 2019. This indicates US exporters have outbid crushers for the China program. Despite a significant rebound in the board crush margin, US bean basis has remained strong, led by an export pull, incentivizing farmers to sell. Ultimately, the physical crush margin depends on the growth in global meal demand. Despite the recent ASF outbreak in the EU, the pig export pace year-to-date has remained the strongest in recent history. However, continuously low pig prices have likely taken a toll on feed demand, as September bean and meal arrivals in the EU were lower for a third month in a row. While the US loaded more beans to Europe in August, Sep dropped significantly, as the beans program increased to China. 20/21 US bean sales and shipments so far globally ex China have been largely flat YoY, despite being significantly higher to China YoY.

The USDA raised China bean imports and crush further in the October WASDE. With a recovery from ASF, an increasing share of the global crush for 20/21 is expected to take place in China, while the share taken up by major origins and destinations ex China should decline further from 18/19 peaks. In the short run, China has entered the strong demand season of Q4 as feedstocks are piled up ahead the Chinese New Year.